For the youngest startups throughout the blockchain industry, 2019 has marked a new evolution in crowdfunding. Initial Exchange Offerings (IEOs) have exploded onto the scene, providing an attractive alternative to the independent ICOs that have left investors weary since 2017.
With several months’ worth of completed IEOs on the books, it’s now possible to look over the data and assess which IEO launchpads have been the best and worst performers so far.
IEO Returns by Exchange Platform
IEO Returns by Exchange Platform
The metric that matters most for IEO platforms is the return on investment (ROI) achieved by investors in the projects they support.
Here’s why:
When investors participate in an IEO, many of them are doing so not just because they like the project that’s raising funds, but also because they trust the exchange that’s providing the IEO launchpad.
The thing is, trust must be continuously earned. It’s not enough for an exchange to have a good reputation before they support IEOs, they need to maintain that reputation by selecting IEOs which succeed in the market.
Just imagine what would happen an IEO turns out to be a scam and investors lose all of their money. Nobody would be willing to trust that exchange again in the future.
On the other hand, what happens if an exchange support IEOs that consistently perform well, leading to high ROI for their investors? With each successful IEO, investors will be more confident to support future projects from that launchpad.
Thanks to CryptoRank, we can look at the current and all-time high ROIs to date for each IEO launchpad.
(Source: CryptoRank)
Right away, one thing to notice is that the big name exchanges have been performing substantially better than the smaller ones so far.
The top platforms by ROI — OKEx, Binance, CoinBene, and ZB.com — are all top 20 cryptocurrency exchanges according to CoinMarketCap. Meanwhile, none of the exchanges currently having negative ROI on IEOs is ranked in the top 50.
Although it’s early and some IEO platforms have only supported 1 or 2 projects, the data suggests something that makes sense intuitively: the better exchanges have better performing IEOs.
There are at least three reasons to expect this trend to continue as the IEO market evolves:
- Bigger exchanges have more users, helping IEOs to grow stronger communities in their early stages.
- With IEO support comes an automatic exchange listing, and getting listed on a larger exchange means the token will have higher liquidity.
- The projects that have leverage (e.g. an establish community of supporters, a working product, strong token economics, etc.) will select the best exchange possible to host their IEO.
Considering those points, it’s clear that blockchain projects looking to crowdfund should set their sights high and target the biggest exchanges. This requires more work up front to make the project as appealing as possible, but that work is more than worthwhile if it successfully attracts a top exchange to partner with you.
IEO’s Price Follows BTC Price When Trading Begins
IEO’s Price Follows BTC Price When Trading Begins
Looking more closely at individual IEO performances, it’s clear that USD price and BTC price are highly correlated from the beginning.
The four charts above are for Unification (UND) from Bitforex, Top Network (TOP) from Huobi, Blockcloud (BLOC) from OKEx, and BitTorrent (BTT) from Binance. In these cases and in most of the others we looked at, the initial performance of an IEO depends more on the the greater cryptocurrency market than any other factors.
Even the IEOs that have experienced a so called “pump and dump” more or less followed Bitcoin’s price action.
In addition, we can see from the price charts that most IEOs have sold tokens at close to initial market value. This is a good thing, as it indicates that the industry has learned from the excessive crowdfunding campaigns of 2017 and 2018 which drew the attention of regulators such as the US Securities and Exchange Commision (SEC).
With that being said, there are still bargains to be found in the IEO market. For example, V Systems (VSYS) had an IEO price of $0.0265 and has since increased to an all-time high of about $0.17 with Bitcoin’s mid-April pump. That’s a greater than 500% ROI in around a month for IEO investors who sold the top.
As long as some IEOs continue to perform strongly, we expect that the shift from the old ICO model to this new exchange-supported model will continue to gain momentum.
Get Guidance on the IEO Process
We have been supporting blockchain projects with their crowdfunding campaigns for years.
We understand the IEO market deeply and can leverage our relationships with major cryptocurrency exchanges to help you prepare your project for an IEO. For more information, contact me in telegram @amidatonga.
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